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It is the intent and
objective of the Government of India to attract and promote foreign direct investment
in order to supplement domestic capital, technology and skills, for accelerated
economic growth. Foreign Direct Investment, as distinguished from portfolio
investment, has the connotation of establishing a 'lasting interest' in
an enterprise that is resident in an economy other than that of the investor.
The Government has put in
place a policy framework on Foreign Direct Investment, which is transparent,
predictable and easily comprehensible. This framework is embodied in the Circular
on Consolidated FDI Policy, which may be updated every year, to capture and
keep pace with the regulatory changes, effected in the interregnum. The Department
of Industrial Policy and Promotion (DIPP), Ministry of Commerce &
Industry, Government of India makes policy pronouncements on FDI.
Q. 2. Who can invest in India?
A non-resident entity
(other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest
in India, subject to the FDI Policy. A citizen of Bangladesh or an entity
incorporated in Bangladesh can invest only under the Government route.
NRIs resident in Nepal
and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in
the capital of Indian companies on repatriation basis, subject to the condition
that the amount of consideration for such investment shall be paid only by way
of inward remittance in free foreign exchange through normal banking channels.
Q. 3. How will FDI in retain sector benefit?
-Entry of global retail
giants is likely to see new investment,
-In the short run, it has
the potential to add 3-4 million new jobs.
-Another 4-6 million jobs
could be created in logistics, contract labour, house-keeping and security
-Expected to help develop logistics,
cold chains, warehouses
-Government revenues could
get an additional $ 24-30 billion through various taxes,
-Help reduce wastage of vegetables
and other perishables and help in taming inflation,
-For Consumers it could
mean savings of 5-10%
-May help farmers get
10-30% higher remuneration l Add to economic growth
Q. 4. What do the new rules say? What is single Brand retail?
- Government has allowed
100% FDI in single-brand retail
- The foreign investor
should be the owner of the brand
- Products to be sold
should be of a ‘single brand’ only l Products should be sold
under the same brand name in one or more countries other than India
- Sourcing of 30 percent of
the value of goods purchased will be done from India preferably from small and
medium units, village and cottage industries, artisans and craftsmen
- Quantum of sourcing to
be self certified, to be checked by statutory auditors.
- Retail trading, in any
form, through e-commerce not allowed.
Q. 5. What is Multi-Brand retail?
-Government allows 51% FDI
in multi-brand retail
-Minimum amount to be brought in as FDI by the foreign investor
would be $100 million
-At least 50% of total FDI
to be invested in back-end infrastructure in three years
-At least 30% of the value
of procurement of manufactured/ processed products shall be sourced from Indian
small industries which have a total investment in plant and machinery not
exceeding $1 million
-Retail sales outlets may
be set up only in cities with a population of more than 10 lakh as per 2011
census and may cover an area of 10 Km around the municipal/urban limits of such
-Retail trading in any
forms, by means of e-commerce would not be allowed
-Fresh farm produce,
including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery
and meat products may be unbranded
-Government will have the first
right to procure farm products
Q.6 Why foreign retailers want to enter India?
- Large Market, rising disposable incomes and spending power
- The estimated size of the Indian
retail market is about $450 billion.